Journal of Air Law and Commerce Volume 28 | Issue 2 Article 2 1962 Transatlantic Charter Policy - A Study in Airline Regulation Jack M. Goldklang Follow this and additional works at: https://scholar.smu.edu/jalc Recommended Citation Jack M. Goldklang, Transatlantic Charter Policy - A Study in Airline Regulation, 28 J. Air L. & Com. 99 (1962) https://scholar.smu.edu/jalc/vol28/iss2/2 This Article is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in Journal of Air Law and Commerce by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. TRANSATLANTIC CHARTER POLICY- A STUDY IN AIRLINE REGULATION By JACK M. GOLDKLANGt I. INTRODUCTION A NYONE with enough money can charter a bus, a train, or an ocean liner with few questions asked. Chartering an airplane stands in a class by itself. It can involve compliance with a very complex collection of government and private restrictions. In recent years the charter aviation field has grown tremendously. Since 1957 charter traffic over the Atlantic has increased at the rate of fifty percent each year so that at the height of the 1960 season eleven percent of all transatlantic air traffic was carried on charter flights.' The reason for this increase is not difficult to understand. A round trip charter to Paris may save the chartering party fifty percent of the regular fare.' Not everyone is eligible for this great savings, however. As a result, part of the traveling public is able to obtain a transportation bargain while the majority must cope with expensive single-ticket fares. How this situation evolved is not a simple story. It provides an inter- esting example of the meeting between private industry and government regulation. This article will attempt to tell that story, explain the charter rules today, and explore the future for this field. It will focus on the development of the transatlantic civilian passenger charter market, dealing with the ordinary case where a group hires a plane on a pro-rata share basis.' The first part of the article concentrates on placing charter de- velopment in an industry-wide setting. Many of the legal and admin- istrative problems alluded to in this section are discussed in greater detail in the second part. It is hoped that this organization will make the history more readable and the law more comprehensible. II. HISTORY OF CHARTER REGULATION A. Early Developments; 1945-1954 The history of the Civil Aeronautics Board's policy in the trans- atlantic charter field is very complex. This complexity stems from the dynamic changes which have shaped the course of aviation history since the Second World War. At the end of World War II a large number of surplus airplanes became available at low prices. The scheduled airlines were faced with growing t Cornell University, A.B., 1958; Harvard University, LL.B., 1961. 'Transatlantic Charter Trips, Proposed Rule, 25 Fed. Reg. 10944, 10945 (1960). 'The economy class rate round trip New York to Paris is $525.60. Since complete domination of the scheduled airlines by jet transportation is at hand, the jet fare is given. Hudson, Take-over by jets, N.Y. Times, Feb. 26, 1961, § 10, pt. 1, p. 3, col. 7. Charter fares by piston plane or turbo- prop cost about $260. 3 This is meant to exclude the cargo issue and also "single-entity" charters where the entire price is paid by one party. See CAB Econ. Regs. Pt. 295, Subpt. B (1960). JOURNAL OF AIR LAW AND COMMERCE pains and it became relatively easy for non-scheduled airlines with small amounts of capital to enter the arena.' These "non-skeds" were authorized to provide only "irregular, limited, and sporadic service." This included the right to carry passengers in foreign air transportation.' In theory these new carriers were not supposed to be in direct competition with certifi- cated service. Nevertheless, the Board's rules were not strictly followed and competition with the scheduled lines did exist. After September 10, 1947 the irregular carriers were no longer permitted to engage in foreign air transportation. The Board announced that, in view of the expansion of the American certificated airlines and the award of permits to foreign air carriers, continued activity by the irregular carriers in the foreign field was no longer justified.6 The scheduled American carriers and foreign flag lines had authority to carry charter trips as well as individually ticketed passengers.7 However, they were chiefly occupied at this time with developing scheduled service on their regular routes. The Board's action did not successfully halt all of the activity of the irregular carriers in the foreign field. There was resistance to the new restrictions. For example, on January 6, 1948 the CAB charged Trans- ocean Airlines, an irregular carrier, with violation of the ban on foreign transportation of passengers.! Transocean and other carriers in a similar position argued that since they were operating charter flights they were not engaged in common carriage and therefore were not subject to the Board's jurisdiction.9 Despite the order, in the summer of 1948 Trans- ocean carried eight round trip student charters to Europe." The CAB staff was forced to spend a lot of time establishing the necessary jurisdic- tional facts in the cases of Transocean and other irregular carriers. 1 On June 5, 1950 the Board held that Transocean had been violating the Aviation Act by engaging in its transatlantic charter activities. It said that even if all of Transocean's flights were limited to planeload lots, carrying bona fide charter groups, it would still be engaged in common carriage. Because the airline indiscriminately carried all charter groups it could not be a private carrier for hire. 2 In the meantime other developments had made it possible for the non- certificated carriers to engage in foreign transportation on a limited basis without defying the Board's orders. In May 1949 the Board indicated that it would grant a limited number of exemptions to irregular carriers to 'Large Irregular Air Carrier Investigation, 22 C.A.B. 838, Initial decision of the Trial Ex- aminer at 891 (1955). sIbid; CAB Econ. Regs., § 292.1, 14 C.F.R. § 291 (1949). 6 Ibid; CAB Econ. Regs. § 291.23, as amended June 10, 1947, Transocean A.L., Enforcement Proceeding, 11 C.A.B. 350, 358 (1950); American Soc'y of Travel Agents, Comments on Re- examination of Exemption Policy and Proposed Transatlantic Air Policy for 1951, Nov. 22, 1950 (mim). The Civil Aeronautics Act § 401, 52 Star. 987, 49 U.S.C. 481, provided that U.S. certificated carriers "may conduct charter trips without regard to the points named in its certificate, under regulations prescribed by the Board." Foreign carriers were given authority in their permits to engage in air transportation, which included charters, between points named in their certificates. Foreign Off-Route Charter Service Investigation, Order No. E-12945, Sept. 8, 1958, p. 2. 'Order No. E-1105. 9Section 401 of the present Act prohibits a carrier from engaging in "air transportation" without a certificate. Sections 101 (10) and 101 (21) limit the certification requirement to situations where the airline acts as a common carrier; Investigation of Seaboard & Western Airlines, Inc., 11 C.A.B. 372, 378 (1950). 50 Transocean A.L., Enforcement Proceeding, 11 C.A.B. 3 50 (1950). "1949 Ann. Rep. of the CAB 19. is Transocean A.L., Enforcement Proceeding, 11 C.A.B. 350 (1950). TRANSATLANTIC CHARTER POLICY conduct transatlantic charter flights." Special exemptions were given to two irregular carriers permitting them to operate five round trips carry- ing students to Rome and Tel Aviv. 4 In support of the exemptions the Board mentioned that there would be little effect on the certificated carriers since their facilities were inadequate to handle the transatlantic traffic available at the height of the tourist season. The Board indicated that it would consider requests for exemptions as long as they were for charter trips by "recognized educational, religious and charitable groups." It turned down a request by Flying Tiger Line for a blanket exemption to fly charters and pointed out that it did not plan to make any general change in the restrictions it had placed on the non-certificated carriers." Other irregular and cargo carriers took advantage of the Board's an- nouncement and a number of additional exemptions were issued for the summer of 1949. One of the carriers was Transocean which got permis- sion to conduct 44 transatlantic flights. The carrier was very careful to stipulate that by accepting the exemptions it was not conceding its dis- pute then pending with the Board over the latter's jurisdiction."6 Another carrier got permission for seventy one-way charter flights under similar circumstances. 7 In all, it has been estimated that 2,500 students flew to Europe at bargain charter rates during the summer of 1949 at an average of $350 per round trip. " At that time the only available service on scheduled air lines was first class. The cost of a round trip from New York to London was $630.1" The Board advised the scheduled American carriers that it not only opposed introducing a less expensive form of scheduled transportation than the prevailing first class service but that it would favor an increase of seven per cent, raising the New York to London one-way fare, for example, from $350 to $375." This advice was based on the theory that it was not possible to have enough difference in service to distinguish between first class and other service.